November 2021: Paper 3

Mark scheme

Examiner's comment

1a The market structure that was expected for this question was monopolistic competition, although the characteristics are so close to perfect competition that this model was fully acceptable. Many however wrote ‘monopolistic’ without the noun ‘competition’ and although it may seem generous, this was accepted if it was clear that the model being described was not in fact monopoly. - Allow perfect competition/highly competitive as the ID mark (Knowledge)- with follow on explanation to match - ‘Monopolistic’ is allowed this year for first time as shorthand for monopolistic competition but monopoly/oligopoly is not allowed - Allow low or no barriers to entry - 1 mark for the ID of model, 2 characteristics of model, 2 applications - Diagrams can be used as the analysis marks (up to 2 marks e.g. - price setting power and SNP/normal profit) Below is an exceptional answer worth full marks; This is not: 1b The reason for increased use of hand car washes during a period of lower income was best answered by using the data and the concept of elasticity. Falling income and rising demand is associated with inferior goods, but as with items such as chocolate, the luxury of a car wash might be just the thing to increase standards of living at a low expense. The other common argument used was that the HCW is cheaper than an automated service so this is an inferior good. Many commented on the low price (£5) to explain high demand, but it was important to explain why demand was rising rather than just not responding. - 2 K, 2 Ap, 2 An, 2 Ev - Allow diagrams as An: 2 An or 1Ap + 1 An - Many are confused with PED and YED - be careful when awarding - High utility is an acceptable reason - Reference to aspects of car washing is enough for data marks, e.g. the hoses/chemicals - Be careful for candidates losing track of the question - needs to link to incomes changing This only scored half marks; This was better; good reasons but no evaluation 1c - Answer needs to be about increased migration to UK (opposite in context of leaving the EU/shortage of staff as a result of the global health crisis was seen as EV, a good way to evaluate using the current economic context) - Any industry with large use of migrant workers is accepted as application e.g. - hospitality, nursing, construction - Higher demand for labour and MRP arguments are allowed if correctly explained, although MRP not required - Must have a valid diagram and reference to an industry for L3 - Some segments may not suit low skilled migrant workers e.g. - valeting and paint touch up - Accept variations on the axis if the explanation is correct e.g. - £ not wages - Do not need more than one point as long as ‘effects’ are considered within it. - A Level 3 diagram should be linked to the effect on wages (not confused with price of the product) - The question is the impact on the firm (not wider effects e.g. government budgets) - Application can be shown on the diagram or reference to ‘low skilled jobs’ This clearly starts well with a labour market diagram and a fairly good approach using a cost and revenue diagram: 1d - 1d was much less popular. Causes questions are more difficult to access than effects questions on this paper. - L4 response must have reference to an industry - Must link to the number of firms in the market This was a good attempt at a difficult question This was more typical: This scored quite poorly. It is imperative that the candidate focuses on the requisites of the question. 1e - Must be reference to a specific industry - Any forms of government intervention are allowed This scored 11/25 but this was more typical: This short answer was running out of time. There was an opportunity cost in the introduction here, and although it starts well with a valid idea and some application, this was all that was written, so it scored Level 1 3/25.

Notes from the mark scheme and report

• monopolistic competition (perfect competition / highly competitive also accepted)
• monopoly or oligopoly earn nothing
• many small sellers (10 000 to 20 000), low barriers (cheap sites), little price-setting power (everyone charges £5)
• up to 2 marks for a diagram

Quantitative skills: QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme, including the levels grid and indicative content

Examiner's comment

1a The market structure that was expected for this question was monopolistic competition, although the characteristics are so close to perfect competition that this model was fully acceptable. Many however wrote ‘monopolistic’ without the noun ‘competition’ and although it may seem generous, this was accepted if it was clear that the model being described was not in fact monopoly. - Allow perfect competition/highly competitive as the ID mark (Knowledge)- with follow on explanation to match - ‘Monopolistic’ is allowed this year for first time as shorthand for monopolistic competition but monopoly/oligopoly is not allowed - Allow low or no barriers to entry - 1 mark for the ID of model, 2 characteristics of model, 2 applications - Diagrams can be used as the analysis marks (up to 2 marks e.g. - price setting power and SNP/normal profit) Below is an exceptional answer worth full marks; This is not: 1b The reason for increased use of hand car washes during a period of lower income was best answered by using the data and the concept of elasticity. Falling income and rising demand is associated with inferior goods, but as with items such as chocolate, the luxury of a car wash might be just the thing to increase standards of living at a low expense. The other common argument used was that the HCW is cheaper than an automated service so this is an inferior good. Many commented on the low price (£5) to explain high demand, but it was important to explain why demand was rising rather than just not responding. - 2 K, 2 Ap, 2 An, 2 Ev - Allow diagrams as An: 2 An or 1Ap + 1 An - Many are confused with PED and YED - be careful when awarding - High utility is an acceptable reason - Reference to aspects of car washing is enough for data marks, e.g. the hoses/chemicals - Be careful for candidates losing track of the question - needs to link to incomes changing This only scored half marks; This was better; good reasons but no evaluation 1c - Answer needs to be about increased migration to UK (opposite in context of leaving the EU/shortage of staff as a result of the global health crisis was seen as EV, a good way to evaluate using the current economic context) - Any industry with large use of migrant workers is accepted as application e.g. - hospitality, nursing, construction - Higher demand for labour and MRP arguments are allowed if correctly explained, although MRP not required - Must have a valid diagram and reference to an industry for L3 - Some segments may not suit low skilled migrant workers e.g. - valeting and paint touch up - Accept variations on the axis if the explanation is correct e.g. - £ not wages - Do not need more than one point as long as ‘effects’ are considered within it. - A Level 3 diagram should be linked to the effect on wages (not confused with price of the product) - The question is the impact on the firm (not wider effects e.g. government budgets) - Application can be shown on the diagram or reference to ‘low skilled jobs’ This clearly starts well with a labour market diagram and a fairly good approach using a cost and revenue diagram: 1d - 1d was much less popular. Causes questions are more difficult to access than effects questions on this paper. - L4 response must have reference to an industry - Must link to the number of firms in the market This was a good attempt at a difficult question This was more typical: This scored quite poorly. It is imperative that the candidate focuses on the requisites of the question. 1e - Must be reference to a specific industry - Any forms of government intervention are allowed This scored 11/25 but this was more typical: This short answer was running out of time. There was an opportunity cost in the introduction here, and although it starts well with a valid idea and some application, this was all that was written, so it scored Level 1 3/25.

Notes from the mark scheme and report

• real incomes are falling, so rising demand suggests an inferior good (negative YED)
• £5 is a small share of income, high utility, fewer automatic washes as petrol stations close
• explain why demand rises, not just why it holds up
• do not confuse PED with YED

Quantitative skills: QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme, including the levels grid and indicative content

Examiner's comment

1a The market structure that was expected for this question was monopolistic competition, although the characteristics are so close to perfect competition that this model was fully acceptable. Many however wrote ‘monopolistic’ without the noun ‘competition’ and although it may seem generous, this was accepted if it was clear that the model being described was not in fact monopoly. - Allow perfect competition/highly competitive as the ID mark (Knowledge)- with follow on explanation to match - ‘Monopolistic’ is allowed this year for first time as shorthand for monopolistic competition but monopoly/oligopoly is not allowed - Allow low or no barriers to entry - 1 mark for the ID of model, 2 characteristics of model, 2 applications - Diagrams can be used as the analysis marks (up to 2 marks e.g. - price setting power and SNP/normal profit) Below is an exceptional answer worth full marks; This is not: 1b The reason for increased use of hand car washes during a period of lower income was best answered by using the data and the concept of elasticity. Falling income and rising demand is associated with inferior goods, but as with items such as chocolate, the luxury of a car wash might be just the thing to increase standards of living at a low expense. The other common argument used was that the HCW is cheaper than an automated service so this is an inferior good. Many commented on the low price (£5) to explain high demand, but it was important to explain why demand was rising rather than just not responding. - 2 K, 2 Ap, 2 An, 2 Ev - Allow diagrams as An: 2 An or 1Ap + 1 An - Many are confused with PED and YED - be careful when awarding - High utility is an acceptable reason - Reference to aspects of car washing is enough for data marks, e.g. the hoses/chemicals - Be careful for candidates losing track of the question - needs to link to incomes changing This only scored half marks; This was better; good reasons but no evaluation 1c - Answer needs to be about increased migration to UK (opposite in context of leaving the EU/shortage of staff as a result of the global health crisis was seen as EV, a good way to evaluate using the current economic context) - Any industry with large use of migrant workers is accepted as application e.g. - hospitality, nursing, construction - Higher demand for labour and MRP arguments are allowed if correctly explained, although MRP not required - Must have a valid diagram and reference to an industry for L3 - Some segments may not suit low skilled migrant workers e.g. - valeting and paint touch up - Accept variations on the axis if the explanation is correct e.g. - £ not wages - Do not need more than one point as long as ‘effects’ are considered within it. - A Level 3 diagram should be linked to the effect on wages (not confused with price of the product) - The question is the impact on the firm (not wider effects e.g. government budgets) - Application can be shown on the diagram or reference to ‘low skilled jobs’ This clearly starts well with a labour market diagram and a fairly good approach using a cost and revenue diagram: 1d - 1d was much less popular. Causes questions are more difficult to access than effects questions on this paper. - L4 response must have reference to an industry - Must link to the number of firms in the market This was a good attempt at a difficult question This was more typical: This scored quite poorly. It is imperative that the candidate focuses on the requisites of the question. 1e - Must be reference to a specific industry - Any forms of government intervention are allowed This scored 11/25 but this was more typical: This short answer was running out of time. There was an opportunity cost in the introduction here, and although it starts well with a valid idea and some application, this was all that was written, so it scored Level 1 3/25.

Notes from the mark scheme and report

• Level 3 needs a valid labour market diagram (supply of labour shifts right, lower wage) and an industry reference
• the diagram must show wages, not the product price
• effects on the firm, not the government budget
• falling migration after leaving the EU can be the evaluation

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme, including the levels grid and indicative content

Examiner's comment

1a The market structure that was expected for this question was monopolistic competition, although the characteristics are so close to perfect competition that this model was fully acceptable. Many however wrote ‘monopolistic’ without the noun ‘competition’ and although it may seem generous, this was accepted if it was clear that the model being described was not in fact monopoly. - Allow perfect competition/highly competitive as the ID mark (Knowledge)- with follow on explanation to match - ‘Monopolistic’ is allowed this year for first time as shorthand for monopolistic competition but monopoly/oligopoly is not allowed - Allow low or no barriers to entry - 1 mark for the ID of model, 2 characteristics of model, 2 applications - Diagrams can be used as the analysis marks (up to 2 marks e.g. - price setting power and SNP/normal profit) Below is an exceptional answer worth full marks; This is not: 1b The reason for increased use of hand car washes during a period of lower income was best answered by using the data and the concept of elasticity. Falling income and rising demand is associated with inferior goods, but as with items such as chocolate, the luxury of a car wash might be just the thing to increase standards of living at a low expense. The other common argument used was that the HCW is cheaper than an automated service so this is an inferior good. Many commented on the low price (£5) to explain high demand, but it was important to explain why demand was rising rather than just not responding. - 2 K, 2 Ap, 2 An, 2 Ev - Allow diagrams as An: 2 An or 1Ap + 1 An - Many are confused with PED and YED - be careful when awarding - High utility is an acceptable reason - Reference to aspects of car washing is enough for data marks, e.g. the hoses/chemicals - Be careful for candidates losing track of the question - needs to link to incomes changing This only scored half marks; This was better; good reasons but no evaluation 1c - Answer needs to be about increased migration to UK (opposite in context of leaving the EU/shortage of staff as a result of the global health crisis was seen as EV, a good way to evaluate using the current economic context) - Any industry with large use of migrant workers is accepted as application e.g. - hospitality, nursing, construction - Higher demand for labour and MRP arguments are allowed if correctly explained, although MRP not required - Must have a valid diagram and reference to an industry for L3 - Some segments may not suit low skilled migrant workers e.g. - valeting and paint touch up - Accept variations on the axis if the explanation is correct e.g. - £ not wages - Do not need more than one point as long as ‘effects’ are considered within it. - A Level 3 diagram should be linked to the effect on wages (not confused with price of the product) - The question is the impact on the firm (not wider effects e.g. government budgets) - Application can be shown on the diagram or reference to ‘low skilled jobs’ This clearly starts well with a labour market diagram and a fairly good approach using a cost and revenue diagram: 1d - 1d was much less popular. Causes questions are more difficult to access than effects questions on this paper. - L4 response must have reference to an industry - Must link to the number of firms in the market This was a good attempt at a difficult question This was more typical: This scored quite poorly. It is imperative that the candidate focuses on the requisites of the question. 1e - Must be reference to a specific industry - Any forms of government intervention are allowed This scored 11/25 but this was more typical: This short answer was running out of time. There was an opportunity cost in the introduction here, and although it starts well with a valid idea and some application, this was all that was written, so it scored Level 1 3/25.

Notes from the mark scheme and report

• causes of the number of firms: barriers to entry, contestability, economies of scale, regulation
• macro: economic growth, protectionism, exchange rates
• Level 4 needs micro and macro and a named industry linked to the number of firms
• report: "Causes questions are more difficult to access than effects questions"

Mark scheme, including the levels grid and indicative content

Examiner's comment

1a The market structure that was expected for this question was monopolistic competition, although the characteristics are so close to perfect competition that this model was fully acceptable. Many however wrote ‘monopolistic’ without the noun ‘competition’ and although it may seem generous, this was accepted if it was clear that the model being described was not in fact monopoly. - Allow perfect competition/highly competitive as the ID mark (Knowledge)- with follow on explanation to match - ‘Monopolistic’ is allowed this year for first time as shorthand for monopolistic competition but monopoly/oligopoly is not allowed - Allow low or no barriers to entry - 1 mark for the ID of model, 2 characteristics of model, 2 applications - Diagrams can be used as the analysis marks (up to 2 marks e.g. - price setting power and SNP/normal profit) Below is an exceptional answer worth full marks; This is not: 1b The reason for increased use of hand car washes during a period of lower income was best answered by using the data and the concept of elasticity. Falling income and rising demand is associated with inferior goods, but as with items such as chocolate, the luxury of a car wash might be just the thing to increase standards of living at a low expense. The other common argument used was that the HCW is cheaper than an automated service so this is an inferior good. Many commented on the low price (£5) to explain high demand, but it was important to explain why demand was rising rather than just not responding. - 2 K, 2 Ap, 2 An, 2 Ev - Allow diagrams as An: 2 An or 1Ap + 1 An - Many are confused with PED and YED - be careful when awarding - High utility is an acceptable reason - Reference to aspects of car washing is enough for data marks, e.g. the hoses/chemicals - Be careful for candidates losing track of the question - needs to link to incomes changing This only scored half marks; This was better; good reasons but no evaluation 1c - Answer needs to be about increased migration to UK (opposite in context of leaving the EU/shortage of staff as a result of the global health crisis was seen as EV, a good way to evaluate using the current economic context) - Any industry with large use of migrant workers is accepted as application e.g. - hospitality, nursing, construction - Higher demand for labour and MRP arguments are allowed if correctly explained, although MRP not required - Must have a valid diagram and reference to an industry for L3 - Some segments may not suit low skilled migrant workers e.g. - valeting and paint touch up - Accept variations on the axis if the explanation is correct e.g. - £ not wages - Do not need more than one point as long as ‘effects’ are considered within it. - A Level 3 diagram should be linked to the effect on wages (not confused with price of the product) - The question is the impact on the firm (not wider effects e.g. government budgets) - Application can be shown on the diagram or reference to ‘low skilled jobs’ This clearly starts well with a labour market diagram and a fairly good approach using a cost and revenue diagram: 1d - 1d was much less popular. Causes questions are more difficult to access than effects questions on this paper. - L4 response must have reference to an industry - Must link to the number of firms in the market This was a good attempt at a difficult question This was more typical: This scored quite poorly. It is imperative that the candidate focuses on the requisites of the question. 1e - Must be reference to a specific industry - Any forms of government intervention are allowed This scored 11/25 but this was more typical: This short answer was running out of time. There was an opportunity cost in the introduction here, and although it starts well with a valid idea and some application, this was all that was written, so it scored Level 1 3/25.

Notes from the mark scheme and report

• micro: wage floors raise costs, higher car wash prices, minimum price, health and safety
• macro: equality, inflation, employment
• Level 4 needs micro and macro and a specific industry
• evaluate with government failure (regulatory capture, asymmetric information), PED, WashMark self-regulation

Mark scheme

Examiner's comment

2a This question was poorly understood, and the common confusion between deficits and debts was in evidence. - The candidates do not have to just use Figure 2 - anything from the extract is fine (all figures) but because it is mentioned in the question this must be a very good place to start - 1 implicit mark for national debt understanding - accumulation over time - 1 mark if able to identify a valid reason - Up to 2 for development of reason - 1 application mark for trend and 1 for data reference - Examples of the opportunity costs as analysis e.g. debt servicing Common confusion between debt and deficits: The above failed to score, as the data use was also linked to debt not deficits. This scored full marks: 2b - Must be the impact on firms e.g. - costs, revenue, profit, motivation of workers - Do not award macroeconomic effects - consumption and AD A very common problem was to read the increase in unemployment from 5 to 6.1% as a 1.1% increase. It is strongly advised that the term ‘percentage points’ is used. This scored just one data mark (for the trend) but no marks for the use of 1.1%: The main problem however was not explaining the effect of increased unemployment on firms. Most gave solely macro diagrams and there were no links to the micro, so some impressive chains of reasoning involving AD shifts and multipliers did not unfortunately make a link to the question in many cases. This however scored nearly full marks (needed more evaluation): 2c - Can have one impact with the diagram (no need for 2 separate KAA points) - Do not accept supply and demand diagrams - Must be a shift - not static - Can be either - higher costs (either just AC or both MC and,AC) or increased revenue (to match explanation) and the alternative (revenues or costs) can be used as the evaluation. This answer goes on to evaluate, introduce a second point, then evaluate again, and then make a judgement. Clearly a 12/12 answer: Other diagrams were often used, but they are not advised. This scored 2/12 from the chain of reasoning, not the diagram (this was the total response, so clearly a time issue here too): 2d - 2d was much less popular. It was apparent that causes questions were more difficult for candidates to access than effects questions on this paper. - Can talk about actual or potential - Often hard to find micro factors - General lack of diagrams in the answers - EV - needs to be a criticism of their point (not just the opposite) - Needs to be in reference to the German economy in context for L4 - This answer clearly was going to be fully macro based, and the plan made it clear that the candidate was not confident in applying micro concepts in areas taught within the macro part of the specification. 2e - Needs to be in reference to German fiscal policy for L4 - Many did not successfully find a micro link to fiscal policy, but the most effect answers showed the effects on firms’ cost curves or the positive externalities in consumption of many public sector goods. This answer was clearly a L4 and L3 evaluation, right from the outset: It then goes onto a micro point, and although this isn’t perfectly drawn (MC does not going through the lowest part of AC2) there is every sense of the change costs but it does not give a verbal explanation of why there is only a change in fixed costs The answer as a whole (not fully shown here) did secure nearly full marks but would need a clear link as to why it is fixed and not variable costs changing to secure the higher level micro marks. In future the candidates taking this exam should address the following issues: Use the data in every question. This is a data response paper. Use a diagram in the longer questions if you can, even if it is not requested. For example, the essay question on government spending on public goods, or the essay question on electric cars, could have positive externalities in consumption, even if not required. Timing. Generally, allow a minute per mark, and this gives 20 minutes reading or correction time. You can achieve all the marks in this time, and you do not need to fill all the space available. Question spotting does not help. Candidates who think they know how to answer a certain type of question tend to give generic responses and do not read the data available. Explain every step in your chain of reasoning, and have multiple steps. Stick to either micro or macro in the non-25-mark questions. The questions are based on the separate four themes and you do not need to mix up your answers. Of course, synoptic answers are valid, but the safest and most reliable option is to ‘keep it simple’. Structure your answers around the material provided, rather than trying to pin the data onto a pre-learned theoretical answer. In your 25-mark essays, write an informed, critical conclusion weighing up your argument, not a summary. Return to the question, and answer it - avoiding the personal pronoun is preferred - in an informed and reasoned framework. with its registered office at 80 Strand, London, WC2R 0RL, United Kingdom

Notes from the mark scheme and report

• debt is the accumulation of past deficits: do not confuse debt with deficits
• interest payments have an opportunity cost, harder to borrow in future
• use Figure 2 (falling to 60% in 2019) or the 1.9% surplus
• report: "This question was poorly understood, and the common confusion between deficits and debts was in evidence"

Quantitative skills: QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme, including the levels grid and indicative content

Examiner's comment

2a This question was poorly understood, and the common confusion between deficits and debts was in evidence. - The candidates do not have to just use Figure 2 - anything from the extract is fine (all figures) but because it is mentioned in the question this must be a very good place to start - 1 implicit mark for national debt understanding - accumulation over time - 1 mark if able to identify a valid reason - Up to 2 for development of reason - 1 application mark for trend and 1 for data reference - Examples of the opportunity costs as analysis e.g. debt servicing Common confusion between debt and deficits: The above failed to score, as the data use was also linked to debt not deficits. This scored full marks: 2b - Must be the impact on firms e.g. - costs, revenue, profit, motivation of workers - Do not award macroeconomic effects - consumption and AD A very common problem was to read the increase in unemployment from 5 to 6.1% as a 1.1% increase. It is strongly advised that the term ‘percentage points’ is used. This scored just one data mark (for the trend) but no marks for the use of 1.1%: The main problem however was not explaining the effect of increased unemployment on firms. Most gave solely macro diagrams and there were no links to the micro, so some impressive chains of reasoning involving AD shifts and multipliers did not unfortunately make a link to the question in many cases. This however scored nearly full marks (needed more evaluation): 2c - Can have one impact with the diagram (no need for 2 separate KAA points) - Do not accept supply and demand diagrams - Must be a shift - not static - Can be either - higher costs (either just AC or both MC and,AC) or increased revenue (to match explanation) and the alternative (revenues or costs) can be used as the evaluation. This answer goes on to evaluate, introduce a second point, then evaluate again, and then make a judgement. Clearly a 12/12 answer: Other diagrams were often used, but they are not advised. This scored 2/12 from the chain of reasoning, not the diagram (this was the total response, so clearly a time issue here too): 2d - 2d was much less popular. It was apparent that causes questions were more difficult for candidates to access than effects questions on this paper. - Can talk about actual or potential - Often hard to find micro factors - General lack of diagrams in the answers - EV - needs to be a criticism of their point (not just the opposite) - Needs to be in reference to the German economy in context for L4 - This answer clearly was going to be fully macro based, and the plan made it clear that the candidate was not confident in applying micro concepts in areas taught within the macro part of the specification. 2e - Needs to be in reference to German fiscal policy for L4 - Many did not successfully find a micro link to fiscal policy, but the most effect answers showed the effects on firms’ cost curves or the positive externalities in consumption of many public sector goods. This answer was clearly a L4 and L3 evaluation, right from the outset: It then goes onto a micro point, and although this isn’t perfectly drawn (MC does not going through the lowest part of AC2) there is every sense of the change costs but it does not give a verbal explanation of why there is only a change in fixed costs The answer as a whole (not fully shown here) did secure nearly full marks but would need a clear link as to why it is fixed and not variable costs changing to secure the higher level micro marks. In future the candidates taking this exam should address the following issues: Use the data in every question. This is a data response paper. Use a diagram in the longer questions if you can, even if it is not requested. For example, the essay question on government spending on public goods, or the essay question on electric cars, could have positive externalities in consumption, even if not required. Timing. Generally, allow a minute per mark, and this gives 20 minutes reading or correction time. You can achieve all the marks in this time, and you do not need to fill all the space available. Question spotting does not help. Candidates who think they know how to answer a certain type of question tend to give generic responses and do not read the data available. Explain every step in your chain of reasoning, and have multiple steps. Stick to either micro or macro in the non-25-mark questions. The questions are based on the separate four themes and you do not need to mix up your answers. Of course, synoptic answers are valid, but the safest and most reliable option is to ‘keep it simple’. Structure your answers around the material provided, rather than trying to pin the data onto a pre-learned theoretical answer. In your 25-mark essays, write an informed, critical conclusion weighing up your argument, not a summary. Return to the question, and answer it - avoiding the personal pronoun is preferred - in an informed and reasoned framework. with its registered office at 80 Strand, London, WC2R 0RL, United Kingdom

Notes from the mark scheme and report

• 5% to 6.1% is a 1.1 percentage point rise, not a 1.1% increase
• effects on firms (lower demand, easier recruitment, lower wages), not macro AD and multiplier chains
• evaluate: only a forecast, still below 11.7% in 2005

Quantitative skills: QS 10 (distinguish between changes in the level of a variable, and the rate of change); QS 2 (calculate, use and understand percentages, percentage changes and percentage point changes); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme, including the levels grid and indicative content

Examiner's comment

2a This question was poorly understood, and the common confusion between deficits and debts was in evidence. - The candidates do not have to just use Figure 2 - anything from the extract is fine (all figures) but because it is mentioned in the question this must be a very good place to start - 1 implicit mark for national debt understanding - accumulation over time - 1 mark if able to identify a valid reason - Up to 2 for development of reason - 1 application mark for trend and 1 for data reference - Examples of the opportunity costs as analysis e.g. debt servicing Common confusion between debt and deficits: The above failed to score, as the data use was also linked to debt not deficits. This scored full marks: 2b - Must be the impact on firms e.g. - costs, revenue, profit, motivation of workers - Do not award macroeconomic effects - consumption and AD A very common problem was to read the increase in unemployment from 5 to 6.1% as a 1.1% increase. It is strongly advised that the term ‘percentage points’ is used. This scored just one data mark (for the trend) but no marks for the use of 1.1%: The main problem however was not explaining the effect of increased unemployment on firms. Most gave solely macro diagrams and there were no links to the micro, so some impressive chains of reasoning involving AD shifts and multipliers did not unfortunately make a link to the question in many cases. This however scored nearly full marks (needed more evaluation): 2c - Can have one impact with the diagram (no need for 2 separate KAA points) - Do not accept supply and demand diagrams - Must be a shift - not static - Can be either - higher costs (either just AC or both MC and,AC) or increased revenue (to match explanation) and the alternative (revenues or costs) can be used as the evaluation. This answer goes on to evaluate, introduce a second point, then evaluate again, and then make a judgement. Clearly a 12/12 answer: Other diagrams were often used, but they are not advised. This scored 2/12 from the chain of reasoning, not the diagram (this was the total response, so clearly a time issue here too): 2d - 2d was much less popular. It was apparent that causes questions were more difficult for candidates to access than effects questions on this paper. - Can talk about actual or potential - Often hard to find micro factors - General lack of diagrams in the answers - EV - needs to be a criticism of their point (not just the opposite) - Needs to be in reference to the German economy in context for L4 - This answer clearly was going to be fully macro based, and the plan made it clear that the candidate was not confident in applying micro concepts in areas taught within the macro part of the specification. 2e - Needs to be in reference to German fiscal policy for L4 - Many did not successfully find a micro link to fiscal policy, but the most effect answers showed the effects on firms’ cost curves or the positive externalities in consumption of many public sector goods. This answer was clearly a L4 and L3 evaluation, right from the outset: It then goes onto a micro point, and although this isn’t perfectly drawn (MC does not going through the lowest part of AC2) there is every sense of the change costs but it does not give a verbal explanation of why there is only a change in fixed costs The answer as a whole (not fully shown here) did secure nearly full marks but would need a clear link as to why it is fixed and not variable costs changing to secure the higher level micro marks. In future the candidates taking this exam should address the following issues: Use the data in every question. This is a data response paper. Use a diagram in the longer questions if you can, even if it is not requested. For example, the essay question on government spending on public goods, or the essay question on electric cars, could have positive externalities in consumption, even if not required. Timing. Generally, allow a minute per mark, and this gives 20 minutes reading or correction time. You can achieve all the marks in this time, and you do not need to fill all the space available. Question spotting does not help. Candidates who think they know how to answer a certain type of question tend to give generic responses and do not read the data available. Explain every step in your chain of reasoning, and have multiple steps. Stick to either micro or macro in the non-25-mark questions. The questions are based on the separate four themes and you do not need to mix up your answers. Of course, synoptic answers are valid, but the safest and most reliable option is to ‘keep it simple’. Structure your answers around the material provided, rather than trying to pin the data onto a pre-learned theoretical answer. In your 25-mark essays, write an informed, critical conclusion weighing up your argument, not a summary. Return to the question, and answer it - avoiding the personal pronoun is preferred - in an informed and reasoned framework. with its registered office at 80 Strand, London, WC2R 0RL, United Kingdom

Notes from the mark scheme and report

• Level 3 needs a valid cost and revenue diagram showing a shift (lower AC/MC or higher AR/MR) and the change in supernormal profit, not supply and demand
• costs may rise in the short run and fall in the long run
• Extract C: firms expect higher long-term profits

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms)

Mark scheme, including the levels grid and indicative content

Examiner's comment

2a This question was poorly understood, and the common confusion between deficits and debts was in evidence. - The candidates do not have to just use Figure 2 - anything from the extract is fine (all figures) but because it is mentioned in the question this must be a very good place to start - 1 implicit mark for national debt understanding - accumulation over time - 1 mark if able to identify a valid reason - Up to 2 for development of reason - 1 application mark for trend and 1 for data reference - Examples of the opportunity costs as analysis e.g. debt servicing Common confusion between debt and deficits: The above failed to score, as the data use was also linked to debt not deficits. This scored full marks: 2b - Must be the impact on firms e.g. - costs, revenue, profit, motivation of workers - Do not award macroeconomic effects - consumption and AD A very common problem was to read the increase in unemployment from 5 to 6.1% as a 1.1% increase. It is strongly advised that the term ‘percentage points’ is used. This scored just one data mark (for the trend) but no marks for the use of 1.1%: The main problem however was not explaining the effect of increased unemployment on firms. Most gave solely macro diagrams and there were no links to the micro, so some impressive chains of reasoning involving AD shifts and multipliers did not unfortunately make a link to the question in many cases. This however scored nearly full marks (needed more evaluation): 2c - Can have one impact with the diagram (no need for 2 separate KAA points) - Do not accept supply and demand diagrams - Must be a shift - not static - Can be either - higher costs (either just AC or both MC and,AC) or increased revenue (to match explanation) and the alternative (revenues or costs) can be used as the evaluation. This answer goes on to evaluate, introduce a second point, then evaluate again, and then make a judgement. Clearly a 12/12 answer: Other diagrams were often used, but they are not advised. This scored 2/12 from the chain of reasoning, not the diagram (this was the total response, so clearly a time issue here too): 2d - 2d was much less popular. It was apparent that causes questions were more difficult for candidates to access than effects questions on this paper. - Can talk about actual or potential - Often hard to find micro factors - General lack of diagrams in the answers - EV - needs to be a criticism of their point (not just the opposite) - Needs to be in reference to the German economy in context for L4 - This answer clearly was going to be fully macro based, and the plan made it clear that the candidate was not confident in applying micro concepts in areas taught within the macro part of the specification. 2e - Needs to be in reference to German fiscal policy for L4 - Many did not successfully find a micro link to fiscal policy, but the most effect answers showed the effects on firms’ cost curves or the positive externalities in consumption of many public sector goods. This answer was clearly a L4 and L3 evaluation, right from the outset: It then goes onto a micro point, and although this isn’t perfectly drawn (MC does not going through the lowest part of AC2) there is every sense of the change costs but it does not give a verbal explanation of why there is only a change in fixed costs The answer as a whole (not fully shown here) did secure nearly full marks but would need a clear link as to why it is fixed and not variable costs changing to secure the higher level micro marks. In future the candidates taking this exam should address the following issues: Use the data in every question. This is a data response paper. Use a diagram in the longer questions if you can, even if it is not requested. For example, the essay question on government spending on public goods, or the essay question on electric cars, could have positive externalities in consumption, even if not required. Timing. Generally, allow a minute per mark, and this gives 20 minutes reading or correction time. You can achieve all the marks in this time, and you do not need to fill all the space available. Question spotting does not help. Candidates who think they know how to answer a certain type of question tend to give generic responses and do not read the data available. Explain every step in your chain of reasoning, and have multiple steps. Stick to either micro or macro in the non-25-mark questions. The questions are based on the separate four themes and you do not need to mix up your answers. Of course, synoptic answers are valid, but the safest and most reliable option is to ‘keep it simple’. Structure your answers around the material provided, rather than trying to pin the data onto a pre-learned theoretical answer. In your 25-mark essays, write an informed, critical conclusion weighing up your argument, not a summary. Return to the question, and answer it - avoiding the personal pronoun is preferred - in an informed and reasoned framework. with its registered office at 80 Strand, London, WC2R 0RL, United Kingdom

Notes from the mark scheme and report

• factors determining growth relative to other developed economies (Figure 3), actual or potential
• micro factors (infrastructure, skills, technology, labour costs) were often missing
• Level 4 needs Germany in context
• evaluation must criticise the point, not just state the opposite

Quantitative skills: QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme, including the levels grid and indicative content

Examiner's comment

2a This question was poorly understood, and the common confusion between deficits and debts was in evidence. - The candidates do not have to just use Figure 2 - anything from the extract is fine (all figures) but because it is mentioned in the question this must be a very good place to start - 1 implicit mark for national debt understanding - accumulation over time - 1 mark if able to identify a valid reason - Up to 2 for development of reason - 1 application mark for trend and 1 for data reference - Examples of the opportunity costs as analysis e.g. debt servicing Common confusion between debt and deficits: The above failed to score, as the data use was also linked to debt not deficits. This scored full marks: 2b - Must be the impact on firms e.g. - costs, revenue, profit, motivation of workers - Do not award macroeconomic effects - consumption and AD A very common problem was to read the increase in unemployment from 5 to 6.1% as a 1.1% increase. It is strongly advised that the term ‘percentage points’ is used. This scored just one data mark (for the trend) but no marks for the use of 1.1%: The main problem however was not explaining the effect of increased unemployment on firms. Most gave solely macro diagrams and there were no links to the micro, so some impressive chains of reasoning involving AD shifts and multipliers did not unfortunately make a link to the question in many cases. This however scored nearly full marks (needed more evaluation): 2c - Can have one impact with the diagram (no need for 2 separate KAA points) - Do not accept supply and demand diagrams - Must be a shift - not static - Can be either - higher costs (either just AC or both MC and,AC) or increased revenue (to match explanation) and the alternative (revenues or costs) can be used as the evaluation. This answer goes on to evaluate, introduce a second point, then evaluate again, and then make a judgement. Clearly a 12/12 answer: Other diagrams were often used, but they are not advised. This scored 2/12 from the chain of reasoning, not the diagram (this was the total response, so clearly a time issue here too): 2d - 2d was much less popular. It was apparent that causes questions were more difficult for candidates to access than effects questions on this paper. - Can talk about actual or potential - Often hard to find micro factors - General lack of diagrams in the answers - EV - needs to be a criticism of their point (not just the opposite) - Needs to be in reference to the German economy in context for L4 - This answer clearly was going to be fully macro based, and the plan made it clear that the candidate was not confident in applying micro concepts in areas taught within the macro part of the specification. 2e - Needs to be in reference to German fiscal policy for L4 - Many did not successfully find a micro link to fiscal policy, but the most effect answers showed the effects on firms’ cost curves or the positive externalities in consumption of many public sector goods. This answer was clearly a L4 and L3 evaluation, right from the outset: It then goes onto a micro point, and although this isn’t perfectly drawn (MC does not going through the lowest part of AC2) there is every sense of the change costs but it does not give a verbal explanation of why there is only a change in fixed costs The answer as a whole (not fully shown here) did secure nearly full marks but would need a clear link as to why it is fixed and not variable costs changing to secure the higher level micro marks. In future the candidates taking this exam should address the following issues: Use the data in every question. This is a data response paper. Use a diagram in the longer questions if you can, even if it is not requested. For example, the essay question on government spending on public goods, or the essay question on electric cars, could have positive externalities in consumption, even if not required. Timing. Generally, allow a minute per mark, and this gives 20 minutes reading or correction time. You can achieve all the marks in this time, and you do not need to fill all the space available. Question spotting does not help. Candidates who think they know how to answer a certain type of question tend to give generic responses and do not read the data available. Explain every step in your chain of reasoning, and have multiple steps. Stick to either micro or macro in the non-25-mark questions. The questions are based on the separate four themes and you do not need to mix up your answers. Of course, synoptic answers are valid, but the safest and most reliable option is to ‘keep it simple’. Structure your answers around the material provided, rather than trying to pin the data onto a pre-learned theoretical answer. In your 25-mark essays, write an informed, critical conclusion weighing up your argument, not a summary. Return to the question, and answer it - avoiding the personal pronoun is preferred - in an informed and reasoned framework. with its registered office at 80 Strand, London, WC2R 0RL, United Kingdom

Notes from the mark scheme and report

• AD shift with multiplier, LRAS shift from infrastructure investment
• micro links: firms' cost curves, positive consumption externalities of public goods
• Level 4 needs German fiscal policy in context
• evaluate with size of multiplier, low borrowing costs, debt brake rules